\chapter{Opportunities And Problems At The Walt Disney Company}

        The Walt Disney Company was funded in 1922, and has became a world leader in family entertainment. Today, the company is operating on a multinational level, and has over 58,000 employees world wide, and over 189,000 share holders. What are the factors that contributed to the company's successes and failures on its way towards becoming the World's largest family entertaining company.\\


        The first opportunity to be discussed is the threat of new entrants. Since the Disney company has been able to find a very distinctive niche in the industry, the entrance barriers are relatively high. The company has been able to grow over a long period of time, and has developed from within the departments of Research and development, marketing, and finance. By relying on past experience, company officials know to a large extent what the target customer wants. As Disney pretty much dominates the family entertainment market, it will be very difficult for such a new organization to develop brand recognition/identification, and product differentiation. Disney has focused of market diversification for years and the company covers a wide array of products and services. Being a market leader has made it possible for the company to practice effective economies of scale in production. For example, over 500,000 copies of the Videocassette "Pinocchio" was sold in only two months, and has 20-30 million visitors to its theme parks every year.\\


        In addition, extremely large amounts of capital investment is required for new entrants into the industry. The capital requirements are extremely high. For instance, Disney spent USD3.6 billion in its European theme park (Disneyland Resort Paris). Only very large companies can meet such large capital requirement. Lastly, the government policy towards the industry appears to be very favorable. The French government invested USD 1.2 billion (40\%) in Disneyland Resort Paris, provided public transportation facilities, provided a large tax relief (from 18.6\% to 7\%) on the cost of goods sold.\\


        The bargaining power of customers is high in the service and in the entertainment industry. Since a large number of customers are needed to make Disney's operations run smoothly, the customers have certain powers. For instance, if the price on a particular home video is too high, customers may be reluctant to spending the money needed to purchase the product. Another example is the entrance fee charged at Disney's theme parks. It is stated in the case that the maximum amount of money that customers are willing to pay is USD 33. Furthermore, the entertainment industry does not save the buyer money. Instead it is designed in a way that it will make the buyer spend more. A majority of Disney's product mix focuses on intangible returns on the buyer's money. The case that some customers may not realize that they are getting such a return may increase the bargaining power of the customers.\\


        Furthermore, the size of the company may certainly be a great advantage. By being able to order large volumes of unique products from unique suppliers, will create a dependency relationship in the industry.\\

        Major problems to the Disney company include the following; Over saturated markets, politics and economic aspects from a global perspective, and foreign competition. As the supply of services and products in the entertainment industry is starting to saturate the markets, competition will be more intense, and only the most powerful companies will be able to survive.I believe that Disney has leveraged this risk to a certain extent as it has diversified and globalized its operations, but still, the company is in the service/entertainment business. Some of its operations, such as the Network-television division may not be able to handle the pressure from the Cable-giants such as Turner Broadcasting Systems (TBS).\\


        Overcrowding seems to be a hindrance that the Disney Company faces in its theme park ventures. They have begun to solve this problem with advances in guest convenience. Disney has created a "Fast-Pass ride reservation system" that allows guests to take advantage of an express line to the more popular attractions. Disney believes that customers who are not constantly standing in line are more apt to enjoy the park going experience. As an added bonus, Disney has found that these customers have more time to browse through and purchase goods at the parks numerous shops, and food outlets.\\


        World politics and the state of the global economies are related to the market capacity. In 1991, the sales revenue of Disney decreased due to a decrease in travel caused by the Persian Gulf War. Furthermore, economic depression could make it too expensive for people to utilize the services and the products offered. Once again, I have to point out that the company has hedged itself to the macroeconomics forces, as it has diversified its business worldwide. If there is a depression in Europe, Disneyland Resort Paris may operate on a loss, meanwhile, the operations in Japan would be able to cover-up the losses by boosting operating revenues. It is known that economic depressions very seldom strikes the whole world economy at once.\\


        Competition is always one of the great problems to a company. Even though that the entrance barriers are relatively high in the niche in which the company is operating in, the problem of new competition cannot be excluded. The movie business and the Network-television departments are extremely risky. In those two areas of operation, Disney is the intruder, and there are several very powerful rivals. A less significant problem comes from new cartoon characters. New cartoon figures appears every-day in television shows, and in movie theaters overseas. Will "Mickey and the Gang" be able to beat the war of the limited market shares internationally and domestically? Only the future generation cartoon lovers can answer that question, but tendencies in the market should be very carefully monitored.\\